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How To Insert CAGR Formula in Spreadsheets on MS Excel

by Tech Desk
by Tech Desk

This tip is about the how To Insert CAGR Formula in Spreadsheets on MS Excel. So read this free guide, How To Insert CAGR Formula in Spreadsheets on MS Excel step by step. If you have query related to same article you may contact us.

How To Insert CAGR Formula in Spreadsheets on MS Excel – Guide

The CAGR represents the Composite Annual Growth Rate, which measures the annual development rate (smoothed pace) of an investment consistently over a given period. For example, suppose you purchased shares worth $100 in 2011 and they are valued at $400 :updated, the CAGR would be the rate at which your investment in those shares has developed each year.

Stock markets are unpredictable, the development of speculation can change from year to year. The profit from speculation can go up or down. CAGR helps smooth the returns on an investment as if it had developed at a consistently balanced rate.

Although there is no CAGR work in Excel, there are several ways to check the CAGR in Excel. This article shows you the best way to make clear and straightforward CAGR recipes using various Excel functions.

The CAGR Formula

  • Investment analysts and business owners often refer to something known as a “CAGR” when discussing projects or proposals. CAGR stands for “compound annual growth rate”, and this formula is widely used for investment analysis. Spreadsheets often include tables for a series of values ​​that show the annual growth rate for each figure. For example, an investment can grow 23%, 11% and 13% in three separate years. However, what would be the average annual percentage increase in those years?
  • You can find an average percentage increase for these values ​​by adding 23%, 11%, and 13% and then dividing them by three. This would equate to an average annual growth of 15.66%. However, this does not take into account the combined effects of the investments. CAGR is an average that also takes composition into account; the CAGR gives you the growth rate which, if it were the growth rate in each successive year, would produce the current total from the starting value. In effect, it is the actual average annual rate of return on an investment.
  • CAGR is not a formula built into Google Sheets, so to use it in your spreadsheets, you’ll need Sheets to do the calculation directly. Fortunately, the CAGR formula is not complex.
  • The CAGR formula is: EV / BV ^ (1 / n) – 1. EV and BV are the values final and initial, while n is the number of time periods (usually months or years) for which you are averaging. The ^ character means “to the power of”; we take the EV / BV ratio and raise it to the power of 1 / n. Subtracting one (one = 100%)

    • How to Add CAGR formula to worksheets

  • Now let’s add the CAGR formula to a spreadsheet. First, check this calculator which returns the composite average growth rate for the numbers entered. On this page, you enter the initial and final along with the number of periods. you can define up the exact same calculator as Sheets, and then use the online calculator to verify that the sheet version is set up correctly.
  • First, open a blank sheet in Sheets. Enter ‘Start Value’ in cell B3 of the worksheet. Select B4 and enter ‘Value final’ in that cell. Enter ‘Number of Periods’ in cell B5, and you may need to widen column B a little to fit the row header. Your spreadsheet should match the one in the snapshot directly below.
  • Now you can add the CAGR formula to the worksheet. First, enter ‘The CAGR’ in cell B7, which is another row title. Select C7 and click on the fx bar. Type ‘= (C4 / C3) ^ (1/2) -1’ in the fx slash and press the Return key. Cell C7 will contain the compound annual growth rate formula as shown in the snapshot directly below. Of course, the CAGR is showing a divide-by-zero error message, because our value final is blank. Don’t worry, we’ll fix it soon!
  • Now it’s time to insert some numbers into the spreadsheet. Enter ‘1,000’ in cell C3 and enter ‘2.250’ as the value final in C4. Enter ‘4’ in cell C4 for the number of time periods.
  • Cell C7 will return the value 0.2247448714. To convert this cell to a percentage, select C7 and press the Format as percentage button. button. Then the compound annual growth rate value in C7 will be displayed as 22.47% as shown directly below.
  • As a final tap, add some formatting to the compound annual growth rate calculator. Select the range of cells B3:C7 with the cursor and press the borders button on the toolbar. Select to add borders to all cells in the calculator as below.
  • Select cells B3:B7 by dragging the cursor over them. press bold button on the toolbar. This option adds bold text formatting to headings.
  • You can add colors to calculator cells. Select the cells to format and click the Fill Color option on the toolbar. This opens a palette from which you can choose new colors.

    • The POW function

  • Another way to calculate the CAGR is to use the POW function from Sheets. The syntax for this function is: POW (base, exponent). For the CAGR formula, the base is the value final / initial value and the exponent is 1 / n.
  • Select cell C8 on your spreadsheet. Type ‘=POW (C4 / C3,1/C5) -1’ in the fx bar and press the Return key. Cell C8 will include the CAGR value of 0.2247448714. Convert C8 formatting to percent as you did in C7. The POW function cell now includes exactly the same common annual growth rate value as C7. These are just two different ways to get the same value. You can use the one you are most comfortable with.

    • Final note

    I hope you like the guide How To Insert CAGR Formula in Spreadsheets on MS Excel. In case if you have any query regards this article you may ask us. Also, please share your love by sharing this article with your friends.

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